Luckin Coffee Inc disclosed on Tuesday that it received a delisting notice from the Nasdaq Inc last week after it failed to file its annual report, sending the shares of the Chinese coffee chain down about 18%.
This is the second notice from the U.S. stock exchange. The previous one was issued in May after the company announced a probe saying that a top executive fabricated and overestimated as much as 2.2 billion yuan ($311.5 million) in 2019 sales.
The latest reason cited by the Nasdaq is in addition to the two bases disclosed last month – public concerns raised by the fabricated transactions and the company’s failure to disclose material information.
The Chinese company, which competes with U.S. coffeehouse Starbucks, said the failure to file its annual report was due to delays caused by the COVID-19 pandemic and as it awaits the result of the internal probe.
The company will hold an extraordinary general meeting next month to vote on whether to oust several directors, including chairman Charles Zhengyao Lu.
Luckin‘s shares have plunged more than 85% since April since the internal probe was announced and has resulted in the company defaulting on a loan secured by pledging millions of shares.
The shares were down at $2.6 in premarket trading after rising earlier in the day following a Reuters report that it picked investment bank Houlihan Lokey also appointed by troubled German tech firm Wirecard, as an adviser.
Luckin Coffee picks Houlihan Lokey as adviser
Luckin Coffee has picked investment bank Houlihan Lokey as an adviser, according to sources close to the matter, following an accounting scandal that has seen the Chinese coffee chain’s shares plummet and creditors pursue assets held by the firm’s family.
Houlihan Lokey’s remit will be to provide financial and strategic advice, one source said.
A Cayman Islands court last week granted lenders, led by Credit Suisse, a court order to wind up Primus Investments Fund and Mayer Investments Fund, entities holding shares in Luckin Coffee and ultimately controlled by the family of the coffee firm’s Chairman Charles Zhengyao Lu.
The lenders are seeking to recover about $324 million of outstanding debt, according to a Cayman Islands court filing.
Luckin’s fortunes have crashed since an internal probe showed much of its 2019 sales was fabricated and overestimated by 2.2 billion yuan ($311.31 million).
Houlihan Lokey has experience with advising other companies in financial distress. It was last week appointed by troubled German tech firm Wirecard to assess its options and is advising the founder of United Arab Emirates-based hospital operator NMC Health.
Luckin Coffee and Houlihan Lokey were not immediately available for comment.
Nasdaq-listed Luckin Coffee’s shares fell 11% on Monday after IFR reported shareholders will vote to oust Lu and other directors at an extraordinary general meeting on July 5. The stock, which was halted from April 7 to May 19, has lost around 85% of its value since the probe was revealed.